TMI Blog2020 (3) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that amount was merely set apart but not in fact credited or paid to any trust or institution registered u/s 12AA of the Act. We find merit into this contention of the assessee. Therefore, set aside the impugned order and restore the same to the file of the Ld. CIT to decide it afresh after considering the submissions of the assessee and examining the records - Grounds raised by the assessee are allowed for statistical purposes. - ITA No.322/Ind/2018 - - - Dated:- 20-2-2020 - Shri Kul Bharat, Judicial Member And Shri Manish Borad, Accountant Member For the Appellant : Shri Girish Agrawal And Miss Nisha Lahoti, A.Rs For the Respondent : Shri S.B. Prasad, D.R. ORDER PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of the Ld. CIT(Exemption) dated 21.3.2018 pertaining to the assessment year 2013-14. The assessee has raised following grounds of appeal: 1. That on the facts in the circumstances of the case and in law, the order u/s 263 of the Act passed by the learned CIT(Exemption) is bad in law and without jurisdiction, hence be cancelled. 2. That on the facts in the circumstances of the case and in law, the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue................ 2. In the instant case, Ld. CIT (Exemption), Bhopal vide the show cause notice issued u/s 263 has stated that the accumulation u/s 11(2) of the Act was not allowable to the Assessee. [PB 04] 3. For accumulation of income, the conditions laid down u/s 11(2) read with rule 17 of the Income Tax Rules, 1962 have to be satisfied to get exemption. The conditions as enumerated in section 11(2) are as follows Clause of section 11(2) Condition as per the relevant clause of section 11(2) Fulfilment of the conditions mentioned by section 11(2) (a) Statement in prescribed form is submitted to assessing officer stating the purpose for which the income is being accumulated or set apart AND Period for which the income is to be accumulated or set apart which shall in no case exceed five years Form 10 has been submitted to the Assessing Officer stating the purpose for which the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is that the error must be such that it is prejudicial to the interests of the revenue. If the order is erroneous but it is not prejudicial to the interests of the revenue, the Commissioner can not exercise the revisional jurisdiction under section 263(1) ..There cannot be any prejudice to the revenue on account of the ITO's failure to follow the procedure prescribed under section 144B, and unless the prejudice to the interests of the revenue is shown, the jurisdiction under section 263(1) cannot be exercised by the Commissioner, even though the order is erroneous. The argument that such an order may possibly be challenged in appeal by the assessee, and for this reason it is prejudicial to the interests of the revenue, has no merit. Section 263(1) clearly contemplates that the order of assessment itself should be prejudicial to the interests of the revenue and this prejudice has to be proved by reference to the assessment order only. It cannot be argued that there is some possibility of the assessment order being challenged or revised in appeal and, therefore, on account of this contingency, the order becomes prejudicial to the interests of the revenue. [emphasis su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alised, has been subjected to tax or not or if it is subjected to tax, whether it has been subjected to tax at a rate at which it could yield the maximum revenue in accordance with law or not. If income in question has been taxed and legitimate revenue due in respect of that income had been realised, though as a result of erroneous order having been made in that respect, in our opinion, the Commissioner cannot exercise powers for revising the order under section 263 merely on the basis that the order under consideration is erroneous. If the material in that regard is available on the record of the assessee concerned, the Commissioner cannot exercise his powers by ignoring that material which links the income concerned with the tax realization made thereon. The two questions are inter-linked and the authority exercising powers under section 263 is under an obligation to consider the entire material about the existence of income and the tax which is realizable in accordance with law and further what tax has in fact been realised under the alleged assessment orders.[emphasis supplied] d. Hon ble Karnataka High Court in the case of V. G. Krishnamurthy [1985] 20 Taxman 65 order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilised for purpose of purchase of land and construction of school building by the assessee itself, at Bhopal. A registered agreement to sale has been entered in the name of assessee d is credited or paid to any trust or institution registered u/s 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in section 10(23C)(iv), 10(23C)(v), 10(23C)(vi) or 10(23C)(via) Income referred to in section 11(2) has been credited to a third party M/s. Girija Colonizers from whom land has been purchased by the assessee in its own name for construction of school building. The payment is not credited to any trust or institution as mentioned in section 11(3)(d) From the above table it is evident that none of the conditions as mentioned in section 11(3) have been triggered in the instant case. Even if it had been so, addition if any would have been made in the year in which the any of the above mentioned clauses of section 11(3) are not satisfied. In the instant case, none of the clauses of section 11(3) have been triggered. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent cannot travel beyond the show-cause notice. The Tribunal was of the view that the ground that the assessee had not fulfilled the conditions laid down under section 80-IA did not form part of the show-cause notice. The Tribunal accepted the argument of the assessee that the Commissioner of Income-tax did not even call for any explanation on this issue and, therefore, the assessee did not have any opportunity to meet this ground. The Tribunal was of the view that it would be against the principles of natural justice that a person who has not been confronted with any ground be saddled with the liability thereof. Consequently the Tribunal held that as the said issue did not form part of the show-cause notice and the assessee was not even confronted with it, even before the CIT, it cannot form the basis for revision of the assessment order under section 263 Para 11 On this aspect of the matter also, we are satisfied with the findings and the approach taken by the Income-tax Appellate Tribunal. No substantial question of law arises for our consideration. [emphasis supplied] 5. In the instant case, assessee was not confronted with the issue on the basis of which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Reliance is placed on following judicial precedents a. Hon ble Jurisdictional High Court of Madhya Pradesh in the case of Ratlam Coal Ash Co. [1987] 34 taxman 443 order pronounced on 17.08.1987 HELD It is well settled that where the ITO made the assessment in undue hurry, accepting what the assessee states in the return without making any enquiries in the circumstances of the case, the Commissioner would be justified in holding the order of the ITO to the erroneous. However, in the instant case, the Tribunal had found that the assessee had furnished all the requisite information and that the ITO considering all the facts had completed the assessment. It was further held that in the circumstances of the case it could not be held that the ITO had made assessment without making proper enquiries. Accordingly, the Tribunal was justified in reversing the order passed by the Commissioner. [emphasis supplied] b. Hon ble Delhi High Court in the case of Anil Kumar Sharma [2010] 194 Taxman 504 order pronounced on 24.04.2010 Para 7 In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1) - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue - Held, yes - Assessee-company entered into agreement for sale of estate of rubber plantation - As purchaser could not pay instalments as scheduled in agreement, extension of time for payment of instalments was given on condition of vendee paying damages for loss of agricultural income and assessee passed resolution to that effect - Assessee showed this receipt as agricultural income - Resolution passed by assessee was not placed before Assessing Officer - Assessing Officer accepted entry in statement of account filed by assessee and accepted same - Commissioner under section 263 held that said amount was not connected with agricultural activities and was liable to be taxed under head 'Income from other sources' - Whether, where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments were framed - Commissioner set aside assessment orders holding that ITO had not made adequate and detailed investigations/enquiries in respect of a major area of assessee-company s operation and source of its income - Tribunal quashed revisional order passed by Commissioner - Whether in view of fact that ITO had made reasonably detailed enquiries, had collected relevant material and discussed various facets of case with assessee, order of Commissioner to direct fresh assessment by going deeper into matter would not form a valid or legal basis to exercise jurisdiction under section 263 - Held, yes - Whether, therefore, impugned order of Tribunal was to be upheld - Held, yes [emphasis supplied] D. Lack of enquiry versus inadequate enquiry conducted by Ld. AO: 1. Ld. AO during the assessment proceedings raised a specific query on admissibility of claim u/s 11(2). In response to which relevant documents including Form 10 were submitted. Ld. AO conducted necessary enquiries and was satisfied with the submission of assessee. If query was raised during scrutiny and was answered to the satisfaction of Ld. AO then mere non-discussion or non-mention thereof in the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Vikas Polymers [2010] 194 Taxman 57 order pronounced on 16.08.2010 HEAD NOTE Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1982-83 - Whether for exercising power under section 263, it is a prerequisite that Commissioner must give reasons to justify exercise of suo motu revisional powers by him to reopen a concluded assessment and exercise of power being quasi-judicial in nature, reasons must be such as to show that enhancement or modification of assessment or cancellation of assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to conclusion that order of Assessing Officer was not only erroneous but was also prejudicial to interest of revenue - Held, yes - Whether before exercising revisional powers, assessee must be called, his explanation sought for and examined by Commissioner, and thereafter, if Commissioner still feels that order is erroneous and prejudicial to interest of revenue, Commissioner may pass revisional orders - Held, yes - Whether if a query was raised during course of scrutiny by Assessing Officer, which was answered to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not the case of the Ld. CIT that certain evidences were overlooked which were very much on record or in the knowledge of the AO. Even this is not the case of Ld. CIT that certain new facts or evidences were brought to the notice of the Revenue Department which were having a direct impact on the income assessed by the AO. Neither there was an escapement of evidence nor there was any evidence now brought to the notice of the revenue department, therefore if that was not the position, then we are not inclined to give our approval to such directions. It is well settled that if the same inquiry by the Assessing Officer in all original proceedings even if it inadequate that cannot flout the Commissioner with jurisdiction u/s 263 merely because he can form another opinion. [emphasis supplied] E. Enquiry to be conducted by Pr.CIT before making an order under section 263 of the Income Tax Act, 1961: 1. Section 263(1) .....................after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify............... To invoke provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:- ( a ) such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; ( b ) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5); ( c ) the statement referred to in clause ( a ) is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year: Provided that in computing the period of five years referred to in clause ( a ), the period during which the income could not be applied for the purpose for which it is so accumulated or se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records, it is evident that the show cause notice was issued on 16.3.2018 and the impugned order was passed on 21.3.2018. Therefore, the issue of initiation of the proceedings is concerned, we do not see any infirmity in to the same as the A.O. failed to take note of the provisions of section 11(2) 11(3) of the Act. The contention of the assessee is that the provisions of section 11(3) sub clause (d) of the Act speaks that is credited or paid to any trust or institution registered u/s 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub clause (4) or sub clause (5) or sub clause (6) or sub clause (6A) of clause (23C) of section 10 of the Act. In the present case, no such sum was credited or paid to any trust or institution. It is contended that amount was merely set apart but not in fact credited or paid to any trust or institution registered u/s 12AA of the Act. We find merit into this contention of the assessee. Therefore, set aside the impugned order and restore the same to the file of the Ld. CIT to decide it afresh after considering the submissions of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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